Arcadia Biosciences, Inc. (RKDA) provides plant-based health and wellness products. Its popular brands include Soul Spring, ProVault, Saavy Naturals, and Zola coconut water.
Arcadia witnessed a five-fold growth in its top line in Q2 on the back of the Lief Brands acquisition. Let us take a look at the financial performance of the company and understand what has changed in its key risk factors that investors should know.
Boosted by sales from the acquisition of a portfolio of wellness brands and GoodHemp seed sales, Arcadia’s revenue surged to $1.4 million from $281,000 a year ago. It, however, failed to meet the Street’s estimates by $284,000.
The CEO of Arcadia, Matt Plavan, said, “In addition to being marked by five-fold revenue growth, our second quarter was the first time Arcadia recorded sales from our consumer brands, representing a key milestone in our transformation to a dynamic producer and marketer of innovative, plant-based health and wellness products.
The quarter was also highlighted by significant advancements in our strategic resource and capacity building, and the successful integration of operations following the Lief Brands acquisition.”
Despite high operating expenses, a gain of $2.8 million from the sale of Bioceres shares and the growth in revenue helped Arcadia narrow its net loss per share to $0.24, as compared to $1.04 a year ago. This net loss per share was lower than analysts’ estimates by $0.03. (See Arcadia Biosciences stock chart on TipRanks)
Plavan added, “We strongly believe that these initiatives, along with the profitable sale of our Bioceres shares will enable us to accelerate our current momentum and strongly position the company to achieve meaningful top-line growth.”
On August 30, H.C. Wainwright analyst Ram Selvaraju reiterated a Buy rating on the stock with a price target of $7.
Commenting on the Lief brands acquisition, Selvaraju said, “In our view, if Arcadia can drive incremental revenue growth via the Lief brands, this could manifest itself in meaningful top-line outperformance.”
Lake Street’s Ben Klieve also has a Buy rating on the stock with a price target of $4.50.
The two ratings add up to a Moderate Buy consensus for Arcadia. The average Arcadia Biosciences price target of $5.75 implies 147.8% upside potential for the stock. Shares are down 8.3% so far this year.
Now, let’s have a look at what’s changed in the company’s key risk factors.
According to the new Tipranks’ Risk Factors tool, Arcadia’s main risk category is Finance & Corporate, which accounts for 34% of the total 38 risks identified. Since June, the company has added one key risk factor under the Production risk category.
Arcadia acknowledges that the CBD products in its portfolio are regulated by different federal, state, and local agencies. Additionally, a changing compliance environment heightens the possibility that Arcadia may be in violation of one or more of the requirements and regulations.
If the company’s operations are found to be in violation then it may become subject to penalties, damages, fines, and curtailing of its operations. Any such event can adversely impact Arcadia’s business and financial results.
The Production risk factor’s sector average is at 20%, compared to Arcadia’s 16%.
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